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Swiss Re has reached an agreement with Japanese insurance group MS&AD for an investment into ReAssure, its closed book business, of up to ₤800 million.

MS&AD Insurance Group Holdings, the parent company of Mitsui Sumitomo Insurance, has agreed to acquire a 5 percent stake in ReAssure for ₤175 million, which values ReAssure at ₤3.5 billion. MS&AD has committed to invest, for up to a three-year period from closing, ₤800 million in total into the equity of ReAssure, with a maximum shareholding of 15 percent.

The minority investment is part of Swiss Re's strategy to provide ReAssure with enhanced financial flexibility to support its future growth. The company stated that ReAssure will remain a core part of Swiss Re's business.

Thierry Léger, CEO of Swiss Re Life Capital, said: "I am delighted that we partner with a like-minded, long-term investor that will invest with us side-by-side. The closed book business is a core component of Swiss Re's overall strategy. Swiss Re remains committed to supporting ReAssure with their strong team, great platform and excellent growth prospects."

Matt Cuhls, CEO of ReAssure, commented: "This is a positive step and gives us greater capacity for future deals. The UK closed book market is expected to offer significant consolidation opportunities in the near future. Thanks to this commitment from MS&AD and given our proven acquisition and integration capabilities, we are well-positioned to seize these opportunities while delivering attractive returns."

The commitment to invest the additional ₤625 million will be satisfied through the issuance of primary equity to MS&AD (based on the same valuation formula) as ReAssure undertakes transactions in the future. Once the 15 percent shareholding threshold is reached, both Swiss Re and MS&AD will subscribe to any further equity injection into ReAssure on a pro rata basis.

The acquisition of the initial 5 percent stake is subject to regulatory approval, and closing is expected to occur in the first quarter of 2018.

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